Question

A company purchased $4,300 worth of merchandise. transportation costs were an additional $380. the company returned $295 worth of merchandise and then paid the invoice within the 1% cash discount period. the total cost of this merchandise is:

Answer 1

Answer:

Cost of inventory includes all costs paid by company to bring inventory to its wareshouse. It includes all expenses except expenses that can be classified as selling and admin expenses. So to determine total cost of inventory we will add all costs and subtract cash discount from it. Please note that cash discounts are part of inventory cost but early payment discounts are not deducted from inventory cost.

Detail calculation is given below.

Purchase price                $ 4300

Transportation cost         $  380

purchase return               ($ 295)

Cash discount                  ($ 40.05)       (4300-295)*1%

Total cost                         $ 4344.95

Answer 2

To solve:
Total cost of merchandise = [(purchased merchandise - returned merchandise) x percentage out of hundred - 1] + transportation cost

Total cost of merchandise = [($4,300 - $295 ) .99] + $380
Total cost of merchandise = ($4,005)(.99) + $380
Total cost of merchandise = $3,964.95 + $380
Total cost of merchandise = $4,344.95